JEWELLERY & WATCHES RETAILING

BY: AVISHEK ROY (04) HASSAN AL BANNA (14) SOURAV DAS GUPTA (21) AMIT GHOSAL (25) ANUP KR ROY (27) POOJA SHARMA (29)

INTRODUCTION
Indian jewellery industry is a highly regarded industry and earns huge profits through the jewellery exports all over the world. Skillful craftsmen of India make intricate designs of jewellery using gold, silver , diamond and other metals. Antique jewellery, costume jewellery, body jewellery, temple jewellery, meenakari and Kundan jewellery are some of the famous Indian jewellery categories. Indian bridal collection includes a tremendous range of jewellery articles for the brides and the grooms to make their grand day more interesting and charming. India is the fastest growing jewellery market in the world. The two major segments of the sector are gold jewellery and diamond jewellery. Gold jewellery forms around 80% of the Indian jewellery market, with the balance comprising fabricated studded jewellery that includes diamond as well as gemstone studded jewellery. The Indian jems and jewellery occupies an important position in the Indian economy. It is a leading foreign exchange earner and also one of the fastest growing industries in the country. In addition, the industry has set up a worldwide distribution network, of more than 3,000 offices for the promotion and marketing of Indian diamonds. According to the report of ibef.com, the gems and jewellery industry market size in 2007-08 was reported to be US$ 24.7 billion in which the diamond jewellery comprises of US$ 2.3 billion.Branded jewellery likely to be the fastest growing segment in domestic sales expected to grow at 40% per annum and exports expected to reach US$ 25 billion by 2012. www.ibef.com

EVOLUTION OF INDIAN DIAMOND INDUSTRY India is very well known in the world as the birthplace for diamonds. It has remained the home of diamonds for over two millenniums. It is difficult to trace the origin of diamonds but history says, that in the remote past, diamonds were mined only in India. Diamond production in India can be traced back to almost 8th century B.C. India in fact, remained undisputed leader till 18th century when Brazilian fields were discovered in 1725 followed by emergence of South Africa, Russia and Australia. World famous diamonds such as the Koh-i-noor, The Orloff, The Great Mogul, The Sancy Hope, Florentine, Nassak, Regent, Pitli and the Nizam etc. were produces of India. Indian diamond industry success was possible only due to the fortuitous combination of the manufacturing skills of the Indian workforce and the untiring and unflagging efforts of the Indian diamantaires, supported by progressive Government policies. The Indian diamond industry received such recognition due to the business acumen and core competency of the early Indian diamantaires who migrated from small towns of Gujarat (specifically Palanpur in Surat and other nearby areas) to Antwerpen (in Belgium) which was then the diamond hub of the world, a market dominated by the orthodox Jews of Israel who claimed expertise in the cutting and processing of large diamonds (sized more than two carats, 1 carat =0.2 grams). The visionary Indian diamantaires started their trade with the cutting and manufacturing of diamonds of very small sizes, which nobody was ready to process (less than two carats, especially one carat and lesser) and gradually made it their core competency, a niche field in which no other country had the mastery in; and coupled with the lowest manufacturing and labour costs worldwide, India assumed greater market presence in the global diamond industry.

Ancient Jewellers
In ancient times the segment who used the gold were the Romans. They used the gold for different purposes as jewellery ,for decorating their weapons, for antiques and decoration items. They had different techniques for making their jewellery as follows: 1.WAX CAST: 2.ENAMELING: 3.CLOISSONE: 4.FILIGREE:

Presence of traditional pockets of jewellery manufacture
Jewellery crafting by traditional goldsmiths is confined to a few regions in India. These pockets are widely separated and involve craftsmen whose skills have been handed down over generations. Surat is an important diamond processing centre, which exports around 80 per cent of the production and has more than 3,500 diamond processing units.

Current scenario
The Indian diamond industry has acquired leadership in cutting and polishing of rough diamonds.India has world’s largest cutting and polishing industry,employing around 800,000 people (constituting 94% of global workers) with more than 500 hi-tech laser machines. The industry is well supported by the government policies and the banking sector – around 50 banks provide nearly US$ 3 billion credit to Indian diamond industry.Indian is therefore a significant player in the world gems and jewellery market both as a source of processed diamonds as well as a large consuming market.

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Jaipur is a key centre for polishing precious and semi-precious gemstones. Delhi and its neighbouring states are famous for manufacturing silver jewellery and articles. Hyderabad is the centre for precious and semi-precious studded jewellery.

Nellore is a source for hand made jewellery that has been supplying the Chennai market for quite a few decades. Belgaum in Karnataka and Nellore together, specialise in studded jewellery using synthetic or imitation stones. Coimbatore in Tamil Nadu specialises in casting jewellery.

India has strengths and offers attractive opportunities across each of the above elements of the value chain, which are detailed below. Mining India has significant reserves of gold, diamond, ruby and other gem stones. Key states with gems stone reserves and mining potential are Maharashtra, Madhya Pradesh, Orissa, Chattisgarh, Bihar and Andhra Pradesh. Orissa has deposits of Ruby and has about 20 varieties of various gemstones like rhodoline, garnet, aquamarine etc. Andhra Pradesh has gold and diamond bearing areas, as well as occurrences of semi-precious and abrasive stones spread over different districts. Recognising the potential of the large unexplored gemstone reserves in India, the Government of India as well as different state governments have been taking initiatives to open up the sector for exploration by global players. For example, the Government of Orissa has announced a comprehensive mining policy allowing private and domestic investments in this sector. These initiatives have attracted foreign investors - diamond mining leases and exploration projects have been undertaken by Rio Tinto and Diamond Trading Corporation (DTC). Untapped reserves of gems and favourable government policies provide opportunities for foreign direct investment in mining and avenues for global companies to explore precious metals and stones in India. Gemstone processing India was the first country to introduce diamonds to the world - the country was the first to mine diamonds, cut and polish them and also trade them. Cutting and polishing of diamonds and other precious stones is one of the oldest traditions in India and the country has earned a considerable reputation both in the domestic and international

markets for its skills and creativity. In the global diamond market today, diamonds processed in India account for 55 per cent share in value terms, 80 per cent share in caratage (weight) terms and 90 per cent share in volume terms. Today there is a ready availability of an entire range of diamonds in nearly every size, quality and cut. India offers the twin advantages of skilled labour and low cost, in the area of gemstone processing, as compared to other gems processing. Jewellery manufacturing India has well-established capabilities in making hand-made jewellery in traditional as well as modern designs. Indian hand-made jewellery has always had a large ethnic demand in various countries with sizeable Indian immigrant population such as the Middle East, South-East Asian countries, USA and Canada. In recent times, India has also developed capabilities in machine-made jewellery. With imported or domestic processed studding, Indian machine made jewellery is expected to generate demand from non-ethnic jewellery markets as well. The share of gold jewellery in India’s exports of gems and jewellery increased from 9 per cent in 1994 to 22 per cent in 2004, an indication of growing acceptance in the world market. In the area of diamonds, Indian jewellers have been focusing on moving up the value chain, from being a polisher of rough diamonds to a manufacture of jewellery. Exports of diamond jewellery are expected to increase in the future. The central and various state governments in India have come out with policy incentives to promote jewellery manufacturing. For example, Andhra Pradesh’s New Industrial Policy declares gems and jewellery as a thrust area and a package of incentives are being offered for setting up manufacturing park facilities for value addition and export of gems and jewellery. Given India’s strengths and potential for growth in this area, jewellery manufacturing can be an attractive area for investment in India. Jewellery Retailing India has a large and growing domestic jewellery market of US$ 8.9 billion. Jewellery retailing in India is undergoing a slow transformation from a largely unorganised sector

to a more organised one. While the family owned jewellery store remains the predominant retail format, new formats such as boutiques, supermarkets and gold souks are emerging for jewellery retail. Indian customers are displaying growing preference for quality, designs and branding. The jewellery retailing sector can offer long term benefits to organised players investing in this area. Certification Following the World Diamond Council’s statement on adopting credible and effective measures against the trade in conflict gems, the Indian government has tightened its certification process for international trade. The Gems & Jewellery Promotion Council is India’s certification authority. The government’s Central Board of Excise and Customs has banned the import or export of rough diamond shipments, which are not accompanied by a Kimberley Process certificate launched in Switzerland. Certification for quality diamonds and jewellery has given a fillip to exports and resulted in greater acceptance of Indian products in the world market Technology The Indian gems and jewellery industry has made rapid strides in design, powered by a new generation of young, professionally trained, technology driven designers. Many of India’s jewellery manufacturing facilities are equipped with the latest CAD / CAM and other advanced design systems. Technology solutions are also available for production control, supply chain and inventory management in the jewellery industry. The Special Economic Zones and Gems and Jewellery Parks developed in different states offer technology-enabled environments that are conductive to growth and quality production. The gems and jewellery industry in India is a good blend of modern manufacturing and design techniques with traditional skills of the Indian artisan. The Indian industry is also compliant with international norms such as the Kimberly Process and the Patriot Act, etc. With well-established capabilities across the value chain, India is an attractive potential market in the gems and jewellery sector.

The Indian gems and jewellery sector is largely unorganised at present. There are over 15000 players across the country in the gold processing industry, of which only about 80 players have a turnover of over US$ 4.15 million (Rs 200 million).There are about 450,000 goldsmiths spread throughout the country. India was one of the first countries to start making fine jewellery from minerals and metals and even today, most of the jewellery made in India is hand made. The industry is dominated by family jewellers, who constitute nearly 96 per cent of the market. Organised players such as Tata with its Tanishq brand, have, however, been growing steadily carving a 4 per cent market share. As India’s jewellery market matures, it is expected to get more organised and the share of family jewellers is expected to decline. There are more than 6000 players in domestic diamond processing industry. The average gestation period for setting up a diamond cutting and polishing unit is 15 months. The low gestation period, coupled with low capital cost allows easy entry into the sector. This has led to the industry being largely characterised by a large number of small scale players. However, just as in the case of jewellery, the share of the organised sector has increased significantly in recent years due to an increase in demand for better and finer quality finished goods.

Exports of gems and jewellery India recorded US$ 15.6 billion worth of exports in the gems and jewellery sector in 2004-05, up by 26.44 per cent from the previous year. The industry is expected to achieve exports of US$16 billion by 2007. jewellery sector recorded 42.23 per cent growth to US$ 3.81 billion in India exported cut and polished diamonds worth US$ 11.18 billion in 2004-05, up from US$ 8.62 billion in 2003-04, registering a growth of 29.6 per cent. India has also started exports of rough diamonds, which formed 4 per cent of gems & jewellery exports in 2004. Exports 200405 expanded which is the latest setup. Exports in the Examples Mumbai),jewellery, ethnic of USA, jewellery

Import of gems and jewellery The main raw materials for the gems and jewellery industry are rough diamonds, recycled gold and gold bars. The industry is highly dependent on imports for its requirement. Rough diamonds and gold bars are imported, while recycled gold is obtained from the domestic market. India imports all its requirements of rough diamonds. India imported rough diamonds worth US$ 7.141 billion in 2004 compared to US$ 6.271 billion in 2003. The imports of diamonds in India have grown at a CAGR of around 10 per cent over the last four years. Imports of rough diamonds grew 6.3 per cent to US$ 7.59 billion in 200405. 1 STRUCTURE OF THE INDUSTRY The Indian diamond industry, similar to its origin, is based more in the villages, towns and cities of Gujarat, where most of the processing facilities are installed; the corporate operations of marketing and finance for all the diamond traders takes place from Mumbai, where all the major traders have their registered offices. Majority of the diamantaires procure the rough diamonds from the Diamond Trading Company (DTC, the marketing arm of the De Beers Group, which mines its diamonds in South Africa), which holds the maximum share of rough diamonds in the world. The DTC sells its rough diamonds through two channels: (A) In the primary market to preferred clients called Sightholders, the world’s leading diamantaires, carefully chosen for their diamond and marketing expertise; and also form a part of the DTC’s Supplier of Choice program; (2) The remainder of the rough diamonds are sold by the DTC in the secondary market worldwide. The other companies, besides DTC, supplying rough diamonds (but to a lesser extent) include Rio Tinto diamonds, Argyle, BHP Biliton and since recently, Lev Leviev Diamonds. All the rough diamonds supplied by each of the companies mentioned follow the Kimberley Process Certification as a proof of its purity, identity and place of origin.

SWOT ANALYSIS STRENGTHS Availability of cheap and skilled labor India has a large labor force and this has made the country the biggest diamond-cutting center for small roughs. Indeed, were it not for Indian workers, many of these small diamonds would be put to industrial use rather than jewellery. India’s strength lies in the two million highly skilled workforces in the country in the gem & jewellery sector, out of which one million are exclusively engaged in export production, who virtually carve exclusive fancy stones. All the processes, right from sorting to polishing requires analytical skills, which cannot be relied upon with machines.

Experience Experience plays a very important role in the success or failure of a business because of the diversity and unique features of diamonds. It requires a lot of experience to diagnose as to what you would obtain after polishing a diamond. It is not necessary that two diamonds looking similar are same. They can be different too. Experience is needed to understand the following features of rough diamonds, which are to be bought for further processing by any diamond processing company. They are:  Toughness: as to how are diamonds and as to how much effort will be required to polish them.  Shade: rough diamonds look just like stones and only experience could tell as to what would be the shade of the diamond.  Purity: it is also important to examine the purity of the diamond. Pricing and inventory management The diamond industry virtually offers the entire range of products, a steady supply of raw materials and a state of the art manufacturing facilities is something that no other center

will be able to match. India’s USP in the days to come is to achieve all round quality at low price. Supportive government policy Since the diamond industry is one of the key contributors to the foreign exchange of our country the government has played a very supportive role to this sector. Incentives like Diamond Dollar Account (DDA) and SEZ packages and lowering of import duties are some examples. The government is always trying to provide a helping hand for the promotion of the diamond industry. Low cost of production The cost of production of diamonds in India is much less as compared to other countries. This is due to the availability of skilled and cheap labour force in the country. The cost of production of each piece of diamond increases with an increase in the size of the diamond. The government is also playing and important role by providing incentives which lowers the overall cost of production of diamonds. WEAKNESS Less emphasis on quality The share of India in medium and large sized diamonds is comparatively less as when compared with other countries is because of less emphasis on quality. It will have a huge impact on large sized diamonds. Therefore, to remain competitive in the world market Indian businessmen will have to improve the quality of their diamonds. Low productivity The labor force in India is less productive as when compared with China, Thailand, Sri Lanka. This may be due to reasons like long hours of work, uneasy work environment and no friendly atmosphere created. The workers therefore are not motivated to work therefore resulting in low productivity. There will have to be an increase in productivity for the diamond sector to flourish. No contracts There is no legal proof of any domestic trade related to diamond transactions in India. Everything in India works on word-of-mouth. There is no legally binding contract

between the people who do business. Though payment of a high amount is to be made by cheque many transactions are done with cash. Lack of standardization Though India is the largest exporter of diamonds in the world , the diamonds are not standardized. A same size, colour, weight diamond may mean different things to businessmen around the world. The Diamond Trading Company should take steps to ensure that the diamonds are standardized so that the dealers and clients are not cheated at any point of time. Insolvency The rate of insolvency is very high in the diamond industry. Payments are not received from clients even after years of expiry of the credit period. There is a gap created. The rich businessmen are becoming richer, and the poor are becoming poorer. The newly entered businessmen are also finding it difficult to survive in the market. One really needs to work hard to earn a living and to survive in the market place. OPPORTUNITIES New markets The leading importer of Indian diamonds is US. This is the only country that has been having a majority share in the world market. The Indians can also explore countries like Europe and Latin America. There is also increasing demand in South East Asian countries. Using advertising campaigns and promotion and marketing can do this. Colored diamonds One of the major opportunities for the Indian diamond industry is colored diamonds. The clients now prefer colored gemstones and diamonds instead of the regular white color. Even other countries in the world are looking up to India for supply of colored diamonds. They are the latest trend in the market. Scope in domestic market Since diamonds are expensive they seem to be possessed by the richer section of the society. The lower class prefers gold jewelry. They consider diamond and risky and very expensive and very hard to handle. Therefore the other classes can be made aware of the benefits of diamonds by advertising and promotion campaigns.

Outsourcing of diamond jewellery The retailers worldwide have shown keen interest in sourcing diamond jewelry requirements from India because of easy availability of diamonds. It has been over a decade and a half since Indian jewelry manufacturers began marketing their products. THREATS Entry of China and Thailand in the diamond sector The Indian diamantaire perceives a growing threat from China as a diamond processing and cutting centre. Unless the government backs the industry up. Else, India may lose its status as the world’s largest diamond processing centre. An increasing number of diamond processors from Israel and Belgium, and even India, are setting up facilities in China for a variety of reasons. The reasons range from a cheap and disciplined labour force to high economic growth in the country resulting in a significant increase in potential consumers in the high-income segment within China, and also to the quality of Chinese workmanship which is steadily improving. China has all the strengths of India—cheap economic labour, infrastructure and a welcoming government. It also offers attractive labour union terms and exportfriendly policies. While it might not affect an industry that has taken 30 years to grow, it is definitely on the cards. As the industry gets more competitive, companies see themselves becoming increasingly efficient to compete. Companies are finding this impossible in a milieu of strict labour laws that inhibit cost cutting measures such as rationalization. Conflict diamonds Another threat to the industry is the recent trade in Conflict Diamonds also called ‘Blood Diamonds’ which have become the thriving industry’s Achilles’ heel. Conflict diamonds are those mined and the income from their sale help finance arms buying and funding activities of terrorist groups. The three named areas have been Angola, Sierra Leoneand Congo. A great fear in the industry is that due to a mere 4 per cent of illegitimate trade, the rest might feel immense ramifications. While there is definitely a moral issue to be

resolved immediately, there are also other ramifications for an industry that thrives much on consumer perception. This could very well happen to the diamond trade. Use of child labor Small boys, sometimes as young as 10 years old, work in hot sheds chiseling roughs which eventually get sold in the fancy shops. Their nimble fingers and sharp eyes enable them to cut these diamonds in remarkable shapes, but while they earn well for these skills many of them find their eyesight getting progressively weaker as they grow older. India processes small diamonds, using traditional labour-intensive methods. About 1.5 million people are employed in the diamond industry, mostly in the unorganized sector. Anti social activities and threat of terrorism Anti social activities are on the rise especially in places like Mumbai. Security has become one of the major concerns for the diamond industry. A loss of a packet of diamonds can cause of a lot of money from your pockets. In recent times there are a lot of robberies happening in broad day light without even anyone noticing it. Therefore there should be an increase in security facilities.

VALUE CHAIN OF THE DIAMOND JEWELLERY INDUSTRY The value chain of the industry starts from sourcing and mining of the metals and extends to jewellery retail. While India is not a major miner of previous metals and stones, the country’s inexpensive and well skilled workforce makes it a world leader in processing of diamonds. The country’s jewellery retail sector is also expected to evolve with a shift among consumers towards branded jewellery, driven by greater quality consciousness. Its being shown below in the chart:

Today, India is the leader in importing, processing and exporting of diamonds.It has a virtually complete dominance in small sized diamonds and accounts for nearly 55 % of world net exports of cut & polished diamonds in value terms, 90 % in terms of pieces and 80 % by caratage. No other export segment of the country has such a significant share in the world market. India accounts for over 70% of the world exports of cut and polished diamonds in caratage. In other words, roughly 7 out of every 10 diamonds set in

jewellery worldwide are from India. The value that different countries hold in the diamond cutting segment is given below in the chart which shows the break-up of the processing expertise of the major diamantaires, clearly showing the status of the Indian diamantaires, the Indian processing expertise since then was in diamonds lesser than 1 carat (upto 7 pts, 7-29 pts and 30+ pts) and even today the Indian diamond traders are the global market leaders, with a rapidly increasing rate of exports.

India’s significance in the global gems and jewellery industry can be largely attributed to its strength in diamond processing. Value enhancement by the Indian diamond processing industry is the highest among other countries. The value addition in diamonds by Indian industry was worth US$ 1.48 billion in 2004 compared to US$ 840 million in 2003. The diamond industry pipeline depicted in the figure below indicates the value addition across different stages from rough diamonds to diamond jewellery, and demonstrates how US$ 1.46 billion of rough production is transformed into US$ 57 billion of global diamond annually.India’s share in the global market is highest in diamond processing. Both value addition and margins increase as the firms move up the value chain, adding to the profits of the companies in the sector. The opportunity for Indian players in the diamond processing segment is to move up the value chain into jewellery

manufacturing, where India has a minimal share at present. Equally new players can enter the diamond jewellery manufacturing space, leveraging the diamond processing capabilities that already exist in the country.

In the current scenario, apprehensions have been expressed in some quarters that a number of the small producers would find it difficult to sustain operations on current margins, which would lead to some turmoil. Industry analysts believe that as the industry matures and takes its next step forward, many of the smaller independent producers may find themselves being absorbed by the larger players. The number of firms may reduce in the process, but not the size of the industry, nor even the levels of activity. Much has been said about the rising bank debt of the Indian industry and there were a couple of disturbing cases of bankruptcy. Yet overall the industry has ridden out the threat and as analysts point out, with manufacturing on the rise and the number of banks providing finance to the trade on the upswing, it is only natural that debt figures will show an increase as well. What is significant however and a sign of the maturity of the players is the process of self-regulation adopted by the industry, in the form of a pact on trading norms. Signed by all major trade bodies in the country, these will be implemented

through a consensus in the trade and interaction with the banks to encourage them to accept these as well has also got underway. There are a few major players in the Gems & Jewellery segment, with Rajesh Exports being the most dominant name. Other key players in the field include Gitanjali Gems, Suhashish Diamonds, Su-Raj Diamonds, Vaibhav Diamonds and Tanishq. Many of these players are focused on developing strong brands, large retail operations, strengthening their core manufacturing operations and building a strong international presence. India’s large population and rapid economic growth offer significant opportunities for growth of the industry. The emergence of jewellery retail chains provide customers with convenience and assurance of quality. The entry of foreign players is also likely to increase competition and provide consumers with greater choice. Apart from the above, there are other factors that contribute to a favorable outlook for the industry.

SCOPE With the exponential growth the industry has achieved over the past years, the future is also equally bright for the Indian diamond industry. The global presence and recognition for Indian diamantaires over the years has been amazing, coupled with the positive vibes the Indian economy (GDP growth, increase in awareness levels) is expecting from the future; India is surely tending to become the global headquarters for diamond and jewellery. The future of the industry is quite promising. More and more buyers across the world are turning to India as their preferred source for quality jewellery. The Gems and Jewellery Export Promotion Council (GJEPC) is looking at exploring new markets, such as Latin American countries. The industry also plans to make India a trading centre for cut and polished diamonds, and is closely working with the Government of India in this regard. The long term prospects looks good with jewellery exports expected to touch US $16 billion in 2010 according to industry estimates.

WATCH INDUSTRY Extraordinary things some times make such an everlasting impression on some ones personality that it becomes a symbol of grace. Watches are one of them which not only enhance your personality with their luxurious designs but also provide you necessity in style. Watches have full line of quality and stylish men and women of internationally renowned brands also. All these men watches and women watches are designed according to the changing trends of the life as well as according to the taste of different people. Earlier watches were used in keeping time as well as measuring the right direction while sailing or mobilizing in a war. Now the watches have become a symbol of status and luxurious necessity of modern life. Watches play a magnificent role in daily life from ordinary purpose to walking on the moon every one needs them. The bridge between the years could be crossed only with design innovation, which is among the biggest differentiators for the watch markets. "Watches are accessories. They are driven by technology but they make a lifestyle statement

History of the watch market The Indian watch industry began in the year 1961 with the commissioning of the watch division of HMT. The first watch model manufactured by HMT was the Janata model in the year 1962. HMT was the leader in the watch market till the Tatas formed Titan Watches in association with Tamil Nadu Industrial Development Corporation in the year 1987. They took a major strategy decision, which later changed the face of the Indian watch market- to manufacture only quartz watches. Liberalization in 1992 and the removal of quantitative restrictions due to WTO has opened the doors for many foreign brands in the Indian market viz. Tissot, Swatch, Omega, Rado, TAG Heuer, Rolex and many others. The import duties on watches are falling which makes the Indian market look attractive for the global majors like Casio, Swatch and Citizen.

Present situation India is an under penetrated market for watches-only 27% of Indians own a watch. Total estimated volume as per 2008 is 39 mn units and value of Rs 2500 crores (USD 625 Mn). Vast proportion of Indian market is below Rs 500 by about 68%. Market has been split into : Low end, Mass market, Premium & Luxury brands

The overall Indian watch market amounts to more or less 48 million wristwatches per year, with a growth rate between 8% to 10%. The organized sector represents only 30% of this amount. Nearly 34 million watches are sold through grey market channels, accounting for around 114 million Euros sales, including import of cheap parts which can be easily assembled in India. The major contributing sector in volume is the under 20 Euros watches segment, but with the opening up of the Indian market, foreign brands are now flooding in, rapidly gaining new shares. Among them, luxury brands (over 2000 Euros watches) can be afforded by more or less than 7 millions people (0,5% of the population). Gold plated watches account for 70% of the market.

Post recessionery situation

After two years of recessionary clout the country’s watch market is expected to grow at a brisk 9% -11% in the next couple of years. With the economy springing positive vibes, steadily progressing retail landscape and larger disposable income levels market insiders opine that Indian consumer is spurring the demand. The 15th India International Watch & Clock Fair- ‘Samaya Bharati’, under the auspices of the Watch Trade Federation held between February 4th to Febaruary 7th, 2010 saw an impressive line up of over 100 national and international companies primarily from India, Switzerland, France, Japan, Taiwan and Hong Kong. According to Hemal Kharod, Chief organizer of the 4 day exhibition held in Mumbai after six years is likely to attract over 4000 dealers, wholesalers from all over the country and abroad. The Indian watch industry inclusive of all product categories is estimated at over Rs. 10,000 crore growing at average rate of 8% annually. Overall 4.5 crores watches are manufactured in a year. The highest share of watches retailed is around the price range from Rs. 500/- to Rs. 3000. The category of watches retailed in the price bracket of Rs. 4000 to Rs. 15000 is growing at an exponential rate of over 20%. The size of the organized luxury watch segment is around 3 % growing at around 20% annually. With liberal imports since the last 10 years many international brands have set shops in India, some even opening their subsidiary in the cities of Mumbai, Delhi and Bangalore. Due to increased international travel, Indian consumer has more awareness of various brands available globally and willing to purchase in India. High import duty and tax burden at various stages has pushed the price of luxury watches in India much higher than their international counterparts. To cater to the price sensitive Indian market, many luxury layers have tried to overcome price barriers by introducing various cuts in their margins to maintain competitiveness in retail market. The industry sources hope the Indian Government acts favorably towards imports duty which is hovering around 40%. This will also keep a check on the unorganized market that has been thriving significantly.

With more international brands foraying in Indian market to cater to the growing demand of fashion and luxury watch consumers, it has also created some challenges for local manufacturers. However local players still continue to dominate the Indian watch industry due to good manufacturing base and price points at which watches are retailed. Collaborations, right planning and joint ventures in marketing hold the key to success for both domestic and International watch manufacturers. Lately India is turning increasingly attractive for retailers, with customers relying more on departmental stores, multi-brand watch outlets and malls to purchase their needs. With the growing infrastructure in tier 2 and tier 3 cities, brands with significant presence in the Indian metros now plan to woo customers through retail tie ups in these cities. The Indian retail v/s The Organized retail Pie 2008

Segmentation of Indian Watch industry

Based on price Mass (Rs.350-600), Popular (Rs.600-900), Premium (Rs.900-1500), Super-premium (Rs.1500-8000) Connoisseur segments (above Rs.8000)
Product Segment Super premium Premium Medium Economy Low Extremely low Total (INR) >5001 2,500 -5,000 1,251-2,500 501- 2,500 251 - 500 < 250 Average Price (INR) 7,500 3,500 1,750 750 400 150 Market Size (000 units) 280 2330 4940 8310 4290 7850 28000 Market Size (INR millions) 2,100 8,155 8,645 6,223 1,716 1,178 28,026

Based on user category Men’s watches Women’s watches Youth watches Kids watches
Sports watches

Value wise share of the segments

e x tre m e ly lo w 6% lo w 6% ec onom y 22%

V a lu e W is e s h a re o f th e s e g m e n ts

s u p e r p re m iu m 7% p re m iu m 29%

s u p e r p re m iu m p re m iu m m e d iu m ec onom y lo w

m e d iu m 30%

e x t re m e ly lo w

The Indian Consumer Based on a research conducted amongst a representative panel of retailers both in Delhi and in Mumbai, Indian consumers can be divided into different categories. Men 1. Elite / Professional class. Prefer to wear branded watches with variety of styles. This category generally prefers to have a small collection of watches suited to various occasions. 2. Traditionnal Businessmen / "Nouveaux riches". Not much concerned by the utility of the watch, this category bears timepieces as status-symbols to communicate their "wealth" achievement. They ideally prefer watches with high jewellery value, gold, diamonds, etc…Preferred brands: Omega, Rolex, Rado. 3. Market savvy, high profile executive. This category prefers branded and designer watches. Cost doesn't matter much to them. They are fashion conscious and update their choices as per the trend. Usually foreign brands with a classic look is preferred. 4. Middle income group (Men). This category generally prefers to buy an all-occasion watch, preferring branded/economical products with a "decent" style. Most preferred watch styles are Day/Date, scratchprooof watches, waterproof watches. This category possesses knowledge about the variety of brands available but is price sensitive. 5. Young men. New generation is highly trends conscious and prefers functionnalities (whether useful or not) with hot looks. The categories most sought after are chronographs, scubas, digital, sports watches. Nike, Swatch, Esprit are at the top list of the most popular brands in this category. 6. Young men from higher middle families. They prefer branded watches. One young man contacted in the field survey commented: "I get respect in my friend's circle because of the uniqueness and the value that my watch carries." 7. Young men from middle class families. They change watches frequently, but solely rely on the grey market, where they can get cheap imitations of high value brands. The are equally trend conscious but highly price sensitive.

Women 1. Jewellery is supposedly Indian women’s prime "weakness". Some of the Indian watch manufacturers, like Titan, have launched solid gold collections. This range has been immensely appreciated by women having good disposable incomes and has also established itself as a regular marriage gift item. 2. Indian women want accessories to match their different dress codes and colours. This particular fact has been noticed by all the major watch manufacturers who are flooding the Indian market with "vibrant" colours and rich designs. 3. The popular "James Bond" Omega watch is very much in demand among the men (in 2000 Omega sold 12'000 pieces). However this trend is also shifting towards the women wanting to project a "confident, bold" image. 4. Sports watches and digital watches with futuristic designs are fast becoming very popular amongst college girls.

Structural factors impacting the industry Lower end of the value chain driving volumes: Products seeking to target higher volumes need to necessarily offer the value proposition. This is because the historical analysis of the performance of the branded watch players in the country (like HMT and Titan) shows that it the lower end of the value chain that drives volumes. Also, to capitalize on the vast potential offered by the economy segment, Titan is launching watches priced below Rs 200 and penetrating rural markets through alternate distribution channels. However, so as to retain margins, it will be necessary for players like Titan to continue innovating the top end of the value chain. Multi-channel retailing: Titan has pioneered the concept of specialty retailing in the watches business. The company reaches out to its target customers through multiple chains like own stores (World of Titan, Time Zone and Sonata Stores) as also multi branded outlets and a national chain of stores. Titan has 174 World of Titan outlets, of which only 7 are owned while the remaining are under the franchise arrangement. Besides stocking the entire range of Titan, these outlets sell select models of Sonata (lower end) and Tommy Hilfiger (licensed brand) watches. Titan also manages 142 Time

Zones, which are multi branded outlets operating in the watches business. Further, Titan has recently started using ITC's e-Choupal channel to penetrate the rural markets.

Value chain of a wristwatch 1.) Hours visualizing, seeing the finished product in his minds eye with every detail down to the smallest screw.

2.) Next is mechanical drawing by hand. Making concrete the vision, then fine tuning the drawings to fit the various components together. All the while maintaining structural integrity for water resistance and durability, and constantly refining the aesthetics.

3.) Designing dials, hands, crowns, bezels, buckle covers, crystals, screws and gaskets.

4.) Finding the right sources. Tremendous research and many conversations and visits to the major Swiss trade show lead to specific makers for dials, hands, crowns, and movements in Switzerland, Germany and France.

5.) Software programming for cutting of a new watch model on the CNC machine (a computer based, high precision, high speed milling machine).

6.) Ordering of raw materials. Ordering specific cutting tools for machining each model. Test machining these materials.

7.) Setting up the CNC machine with work holding devices and tooling for specific models. Then fine tuning CNC programming for specific feeds and speeds to material and tool. And finally, fine tuning the machine setting to achieve the exact fit of the components during assembly.

8.) Production machining of the cases with the CNC machine in the studio.

9.) Careful sanding, polishing and hand detailing of cases after machining.

10.) Setting of the crystals. Fitting the crown tube to the watchcase, then fitting, finishing and setting of a gold bezel to the watchcase.

11.) Fitting the dial to the movement. Setting of the hands, and afterwards trimming of the winding stem to fit the case and setting the crown to the stem.

12.) Final quality checking for fit and finish and assembly of all the components.

13.) Vacuum and pressure testing of the case for water resistance.

14.) Final polishing of the case & fitting of the strap and buckle. Scope ahead... The sale of watches per 1,000 people per annum in India is as low as 40 as against 120 globally. 37% of the population owns watches (Source: IRS data 2008), while just 3.5% of the population owns multiple watches. While the penetration level of 71% in A and B grade cities is healthy, the level is as low as 19% in the rural areas. This data goes beyond doubt to prove the scalability of the Indian branded watch market. However what players need to keep in mind is that they are catering to discerning customers and well-defined customer segments with awareness of designs and brands. Also, presence of foreign players is set to intensify the competition. Thus, the ability to innovate customer centric product offerings and market them through multiple channels will enable players to retain market share and enhance margins.

Equations
VM=Indirect Support For Sales. VM= (Theme+ Lighting+ Elements of Design+ Scientific layout.)

Merchandise + VM=Merchandise +High Probability of Its Sale.
Thus if we deduct the “VM” variable completely or to some extent, the probability of merchandise being sold will decrease.

VM Concepts & Tricks
7 Notes in Store Design Melody Note 1 - Layout = Positioning A layout is an important positioning tool. You can use the layout to convey to your customers whether your store is a discounter or a chic design boutique. The manner in which you guide your customers in the

commercial market is decisive as regards the position you wish to adopt in the overall market.

Customers associate an obligatory guided tour through the store with a discount formula. Therefore this gives you the opportunity to determine how your customers will perceive your store. The very opposite of this formula is an open layout presentation that gives the customer a great deal of freedom of movement. He or she can go anywhere Customers usually associate this layout presentation type with a rather more up market shop.

You should also take a clear position in comparison to your competitors and position yourself in the market in a distinctive way. Your layout will not only contribute to clear positioning, but can also serve to emphasize distinction.

Rule 2 - The first impression The following should be kept in mind as it follows naturally from the idea of the layout as a positioning tool: ‘You never get a second chance to make a first impression’. It is important to give careful consideration to the store's entrance, because it will influence the customer's image of the store.

A large entrance evokes in the customer the notion of an upmarket shopping experience. You will achieve the opposite if you create a small and narrow store entrance, which the customer will associate with a discounter.

Rule 3 - A familiar route When designing a layout, it is of crucial importance to take into account, at an early stage, the way in which customers will be led through the store. A ‘slightly compulsory tour’ yet satisfactory, is recommended. You should give the customer the feeling that the route he has taken in the store was his own decision. On the other hand, from a commercial point of view, it is absolutely necessary to lead the customer along all the important departments of the store. Not just for the sake of turnover, but also for the sake of customer satisfaction. There is no greater source of annoyance for a customer than not being able to find the product he or she needs.

Rule4 - Keeping the balance between customer and technology Designing a customer-oriented layout on the one hand and integrating all the technical requirements on the other hand is often a veritable balancing act. Failure to achieve this balance almost always shows in a layout design. Technology-oriented layouts usually take less account of the customer. It is important that all the departments of the business – both sales

and technical support – steer the same course. And though no eventual compromise will be reached, what will be achieved is the best solution for all parties involved.

Rule 5 - Layout is 2D, but you need to think 3D! Any layout design requires that you plan in two dimensions, but a store is experienced in three dimensions. So pay sufficient attention to the height of the shelves, the arrangement of the rooms and the location of the products. Is it difficult for you to imagine a three-dimensional situation? Then try it with small three-dimensional sketches. At any rate, it is important that you are aware of the three-dimensional effects that the two-dimensional decisions can have.

Rule6 – Arrangement of product ranges in accordance with the customer's wishes Any arrangement of a product range should meet the logical and explicit need of the customer. Customers are creatures of habit. They do not appreciate having to walk through the store unnecessarily in order to find a particular product. Each industry has its own characteristics and there is not really one single recipe that applies to all industries when it comes to the most suitable arrangement. To find the best solution, you could make use of the knowledge and experience acquired by other branch stores. Or draw inspiration from the solutions adopted by your competitors!

Rule 7 - Layout is never an isolated factor It is important to note that layout is always linked to other (construction) elements of a store. For instance, lighting is an important part of a store formula. The lighting will need to be attuned to the layout at the same time as when other details are being planned. Furthermore, there are other factors that affect layout. You should always take into account matters such as location-specific conditions (parking facilities), the other window displays already in place or the height of the rooms available.

Good layout design is not a science. You cannot make prior predictions regarding the amount of time customers will spend in the store nor the rhythm of customer flow. Fortunately, concept design is still based on common sense and a feeling and passion for retail.All the points of attention described in this chapter are intended as support. To avoid possible mistakes and to achieve your goal, beginners especially should use the ten golden rules as a guideline.

“Visual presentation of jewelry has a significant impact on a store's brand image and how customers perceive the merchandise.” By Larry B. Johnson -- JCK Online The visual presentation of jewelry& watches is a critical component of your store brand because of its close proximity to the merchandise itself. Pieces sit on risers, necks, and trays, which are stages for presenting products in their best light. These displays must attract attention to jewelry, help create interest, fuel desire, enhance perceived value, and do so without drawing attention to themselves. Three major features of visual presentation of jewelry have a significant impact on your store's image and how your displays support it. These are color, applicability to the merchandise, and presentation. COLOR It isn't surprising that color is a major factor in perception of a store brand. It's difficult for a store to appear stylish and contemporary if it still uses mauve displays popular in the 1980s, and you won't convey a unique image with the same white leatherette displays everyone else uses. The following ideas will help create a color-coordinated store in which it's clear to customers that the diamond case is brighter and more elegant than the chain case. This also supports the store's plan for traffic flow, helping differentiate areas. • Use a color that sets your store apart from competitors. This is especially important if your store is in a mall, where customers are exposed

to many stores in a single shopping trip. It's easier for customers to remember your store, for example, if it doesn't use white leatherette. • Choose a color that enhances the perceived value of the merchandise and sets you apart. But if you do use white leatherette, combine it with a contrasting secondary color that warms the cold look of white, such as navy blue. • Use color to direct customers' perception of showcases. Diamond cases can be trimmed with displays that are 80 percent white leatherette with 20 percent navy accents (sides, bases, etc.). Midprice merchandise (colored stones, gold, men's jewelry, etc.) can be displayed on elements that are half navy and half white. Lower-price merchandise (chain, charms, sterling silver, etc.) can use displays that are 80 percent navy and 20 percent white. • Don't chase color trends. Don't bother asking your display company's sales rep to recommend the latest “hot” color or one on which diamonds look best. This year's hot color will be cold in a season or two, and most jewelers can't afford to redecorate annually. As for diamonds, they're best displayed on any neutral color with lots of light in the 3000 to 3500 Kelvin range. APPLICABILITY You don't use a screwdriver to drive a nail. Take the same approach with visual merchandising. Use display elements designed to accommodate the type of goods you place on them. If you don't have the right display, don't carry that specific merchandise.

Always ask yourself how you'll display an item before you order it. Reputable display manufacturers have knowledgeable staff to help you display virtually anything. Use their expertise, and you'll avoid awkwardness in your merchandise presentation. Here are some tips: • Don't put multiple pieces on displays designed for one. Draping several necklaces on a single neck form, for instance, blatantly diminishes their value, because it says the pieces don't deserve their own space. • Consider the density of your display trays and the perceived value of the jewelry. Ring trays that hold 25 rings, for example, make a different impression on customers than a tray holding seven or even a single ring stand. • Use differences to help the customer perceive what you want him or her to see. Here's how to arrange a showcase: Place the most-expensive 25 percent of items on individual displays. Put those in the next 25 percent in trays holding five to seven pieces. Progress to trays with capacity for more pieces as price points drop. Your least-expensive goods should always be in your highest-capacity trays. It's easier to convince a customer of the quality, uniqueness, workmanship, and overall value of a ring on a single ring stand, rather than one taken from a tray with 24 similar pieces. PRESENTATION Retail experts say the progressive steps for any sale are attention, interest, desire, conviction, and the close. Thus, each of your showcase presentations must attract attention, stimulate interest, and create thedesire upon which

your sales associates can build to persuade a customer to buy a piece. Consider the following: • Make your displays easy to view. The customer's eye should move easily over the presentation of goods. Position your display elements so every piece of merchandise is easily seen. • Don't overcrowd your showcases. That hurts perception of the value of your goods. • Keep showcases clean and free of smudges and stains. Ask your display provider for suggestions on how to clean new displays. Discard worn elements at the first sign of overuse. To a consumer, faded, frayed, or dirty elements speak volumes about a store and affect perception of its brand image. • Step out from behind the showcase. See for yourself if it meets the attention, interest, and desire criteria before you unlock the store doors. • Be certain any signage in the showcases supports your brand. For example, stores with a higher-end brand image shouldn't use hand-lettered signs. Invest in software to produce quality signage. • Have a sign with your store's name in each showcase. Have you ever had a customer at checkout ask you, as he or she is writing a check, for your store's name? That's evidence that your store needs more name recognition. If customers don't know your store's name at the moment of purchase, how can they tell their friends where they bought that beautiful piece of jewelry?

As you work to build or sustain your store-brand image and strategy, remember that how you present your merchandise is an important part of that. Make it important to everyone in your store. Do your research. Read books on visual merchandising. Ask experts for suggestions. Experiment with new ideas. Look at how all types of retailers use displays to enhance their brand images.
Then, put your ideas into action and settle for nothing less than continuous improvement in the store brand image you want.

Layout, Traffic Flow, and Showcase Placement
Customers are too distracted by the experience of entering your store to shop within the first four feet. Use that space to create a positive impression, but not to sell specific merchandise. Make the store easy to navigate. Keep aisles open and wide enough to avoid confinement. And remember the special needs of physically challenged customers. Lay out showcases to maximize presentation. Avoid long, uninterrupted straight runs of cases. Customers tend to move quickly along such areas without stopping. You can present more cases if the traffic flow changes direction. Consider using angled cases to create shopping cubicles that break up traffic flow. Don't be afraid to make the spaces around the diamond merchandise even more open. Customers making major decisions in a store want some space and do not want to be constantly jostled by passersby. If not given the comfort zone necessary to make an important decision, they'll quickly leave. Begin your store merchandise plan by classifying your goods into groups. Use broad terms such as bridal, other diamond, golf, colored gemstone, silver, watches, men's, estate, pearls, and giftware. Next, determine the relative importance of each. Evaluate

how each category fits into your store's image, marketing, and profit picture. If your store is to be known for diamond jewelry, position that category in the prime area of your store and build around it. Place your merchandise in the showcases where it has the best chance of achieving your expectations. Give each category the space it needs to succeed. If your pearl sales tend to be to the same type of customer who buys right-hand diamond rings, position the pearl case nearby. Does your male customer tend to wait by the cash/wrap or the watches when his female companion shops for earrings? Place your men's goods there and he might find something for himself. If you have great prices on watches that should draw in many customers, place them where they will build that traffic. Some categories should not be placed together. For example, the diamond customer contemplating a solitaire does not want to be distracted by teenagers looking at charms, silver, or chain. Place your cash/wrap station in a convenient central location. Many retailers prefer to put it at the back of the store. Keep security issues in mind if you anticipate having only one or two employees in the store at any given time. An employee ringing up a sale in the back can't keep an eye on shoppers at the front.

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